Credit Crunch Squeezes Student Loans

As private funds dry up, families look to feds to pay for college tuition
By Nick McMaster,  Newser Staff
Posted Jul 23, 2008 3:04 PM CDT
Andrew Favreau, a part-time MBA student at DePaul University, poses with a pile of textbooks near the Chicago campus.   (AP Photo)
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(Newser) – The slump in the credit markets has shrunk capital available to brokers of student loans, complicating the already-difficult task of financing a college education. The Boston Globe relates the story of one Massachusetts family, the Ferragutos, who received word this year from the state’s education finance agency informing them that federal loans, including low-interest Stafford loans, were no longer available.

What’s worse, Citibank stopped doing business this year with the school where the Ferragutos’ son studies, part of a downsizing of its loan program. The family has since found some additional support from the government’s direct-loan program, which turns colleges into brokers of loaned federal money. But it is still a tight squeeze to get to the annual cost of $47,500.